5 - The Beveridge curve

Summary

To what extent can we explain increased unemployment by workers' lack of mobility and reduced economic incentives that used to drive people rapidly either to take a job or to leave the labour force? Finding an objective and convincing answer to this question is essential for a better understanding of the respective roles of the many factors which might have influenced the rise in unemployment in Europe.

The question fits within the framework of a more basic consideration: to distinguish, in the growth of unemployment, what comes from factors affecting frictional unemployment, as opposed to those directly reflecting the general disequilibrium between labour supply and demand.

I have the feeling that our methodology remains too uncertain on how we ought to make such a distinction. Personally speaking, I happen to probe among, if not the choice of fundamental concepts, at least the choice of specifications which should then serve as reference to give a precise meaning to the distinction, and make possible its econometric application.

This chapter, in which I mainly consider the theoretical analysis preliminary to answering the question put at the beginning, expresses my feeling my way, dissatisfied as I am on reading some of the articles trying to identify the role of mobility and economic incentives in the rise of unemployment in various countries.